Can a Director Remove a Shareholder?

Shareholders and directors are the two highest position at the company. Can a director remove a shareholder from its position?

In a corporate world, directors and shareholders are arguably the most important individuals to run the company. Both positions have the highest authority in the company so that to dismiss them from that position requires a more complicated and complex process compared to any other employees in general.

However, it is important to note that the director and shareholders are not completely immune from dismissal. By going through certain processes that have been regulated by the law, both directors and shareholders can be dismissed from their respective positions.

As one of the most important positions in the company, the director does have some authorities that are not owned by workers in other positions, however, can a director dismiss the shareholders?

Dismissal Rules According To Law

Just like any other employees in general, the law in Indonesia has regulated the rules for dismissing the members of the board of directors of a company, including directors, executive directors, or shareholders. This dismissal procedure is carried out based on the provisions of Act No.1 of 1995 concerning Limited Liability Companies (UUPT).

According to the law, the legal authority to “remove” or dismiss a member of the board of directors or shareholders at any time is through the General Meeting of Shareholders (known as RUPS). Based on the article 91, The meeting or the Commissioner has the authority to dismiss a member of the board of directors for a maximum period of 30 days. After that, the General Meeting of Shareholders will be held again to decide whether the person is returned to its original position or dismissed.

The individuals who are temporarily dismissed also have the right to defend themselves at the time the RUPS takes place actively. In this case, the individual must be present directly without being represented by another person or by mail.

However, this method only applies to the dismissal of a member of the board of directors. A shareholder cannot be dismissed with a similar process except if there is a massive violation of legal provisions, Articles of Association, or other agreements among shareholders.

Without these particular reasons, you cannot be removed as a shareholder because it is contrary to your legal position as a shareholder.

The lawsuit against an Unusual Dismissal

If you have been illegally removed either as director or shareholder, you can file a lawsuit before the competent District Court (Article 54 UUPT). However, before you file a lawsuit, you need need to re-examine the facts, especially the completeness and the validity of the documentation.

You are also advised to get help immediately from a competent professional lawyer who has ample experience in handling internal company problems. After all, the problem among the board of directors is usually very complex and often confused.

Final Answer

From the above facts, it can be concluded that the director does not have the right to remove a shareholder from his position. Even though the shareholders take action that meets the requirements for demotion, in the end, the decision to dismiss the shareholders is entirely the right of the General Meeting of Shareholders participants to be discussed and decided.